March 7 (Bloomberg) -- Deutsche Lufthansa AG, Europe’s
second-biggest airline, reported a full-year loss as the
unprofitable U.K.-based BMI unit that the German company is in
the process of selling weighed on earnings.

Lufthansa’s loss was 13 million euros ($17 million) versus
year-earlier net income of 1.1 billion euros. Discontinued
operations clipped earnings by 285 million euros, reflecting a
loss at BMI and valuation effects linked to the disposal.

The Cologne-based carrier reported an operating profit of
820 million euros, down 18 percent, beating the 811 million-euro
estimate of analysts surveyed by Bloomberg. It will pay
investors a 25 cent a share dividend, according to a statement.

“This is intended to let shareholders participate in the
successful operating performance in the reporting year in a way
that is justifiable to the financial profile,” the company said.

British Airways parent International Consolidated Airlines
Group SA agreed in December to buy BMI’s main operations, based
at London Heathrow airport, for 172.5 million pounds ($272
million). A second bidder has also emerged for U.K. carrier’s
Bmibaby discount division, Lufthansa said March 5.

Lower Dividend

“BMI was a problem child and didn’t fit with Lufthansa’s
strategy, so from that perspective it’s positive for them to get
it out of their business, but even with these figures IAG has
got a very good deal by acquiring the airline without pension
issues,” said Stephen Furlong at Davy Stockbrokers in Dublin.

While Lufthansa said it was making an exception to its
dividend rule to make an award after posting a net loss, the
figure was less than consensus of about 50 cents, based on
operating profit estimates, the analyst said. The sales number
was also 500 million euros below forecasts, he said.

“That could imply that fourth-quarter revenues were a bit
weak,” said Furlong, who rates the stock “neutral.”

Lufthansa is seeking to revive earnings via a savings plan
aimed at boosting annual profit by 1.5 billion euros by 2014,
the airline said Feb. 7. The cuts will come through increased
integration of areas including cargo, engineering and catering,
and are necessary to finance future fleet investment, it said.

The profit-improvement plan -- named SCORE, or Synergies,
Costs, Organization, Revenues, Execution -- follows on from a
package that saved 1 billion euros between 2008 and 2011.
Cologne, Germany-based Lufthansa has already trimmed capacity
growth for the current 12 months to 3 percent from a planned 9
percent after saying Sept. 20 that 2011 operating profit would
fall short of the previous year’s 876 million euros.